Who Must Report? Understanding the Role of Title Companies, Escrow Agents, and Attorneys Under FinCEN’s New Rule

A Strategy Law Guide for Real Estate Lawyers and Business Lawyers in San Jose

FinCEN’s Residential Real Estate Reporting Rule: Why Legal Guidance Matters

The U.S. Financial Crimes Enforcement Network (FinCEN) has adopted sweeping new reporting requirements that will affect a broad range of residential real estate transactions, including many all-cash purchases involving entities or trusts. These rules apply even where no traditional financing is involved and will significantly change how certain real estate closings are handled from a compliance standpoint.

This alert outlines who must report, how reporting responsibility is determined when multiple parties are involved, and why early involvement of legal counsel is critical to managing risk and avoiding missteps under the new framework.

The rules become effective March 1, 2026, giving industry participants time to implement compliance protocols—but not time to ignore planning.

Why This Rule Matters

FinCEN’s Residential Real Estate Rule is designed to increase transparency in U.S. real estate transactions and to deter money laundering, fraud, and other illicit financial activity that can be concealed through opaque ownership structures.

Under the rule, non-financed transfers of residential real estate—most notably all-cash purchases by legal entities or trusts—must be reported to FinCEN through a Real Estate Report. These transactions have historically been outside routine AML reporting regimes, and FinCEN has made clear that closing professionals are now expected to serve as a key line of defense.

For buyers, sellers, and professionals involved in closings, the consequences of misunderstanding the rule can include regulatory exposure, transaction delays, and reputational risk.

Who Is the “Reporting Person”?

At the center of the rule is the concept of the “reporting person”—the individual or entity responsible for filing the Real Estate Report with FinCEN. Importantly, only one reporting person is required per transaction, but determining who that person is requires careful analysis.

FinCEN provides two mechanisms for identifying the reporting person:

1. Written Designation Agreement

The parties may designate a reporting person in writing. This approach allows transaction participants—such as title companies, escrow agents, or attorneys—to proactively assign responsibility to the party best positioned to comply.

2. Reporting Cascade (Default Rule)

If there is no written designation, FinCEN applies a mandatory hierarchical “cascade” to determine who must report.

Understanding the Reporting Cascade

Absent a designation agreement, reporting responsibility falls to the first applicable party in the following order:

• The closing or settlement agent listed on the closing statement
• The person conducting the closing or settlement
• The person who prepares the deed or transfer instrument
• The title insurance underwriter
• The person who disburses the greatest amount of funds
• The title evaluator
• If none of the above apply, the grantor of the property

In most residential transactions, a title company or settlement agent will fall at the top of the cascade. However, in more complex deals—particularly those involving entities, trusts, or unconventional closing structures—attorneys or other professionals may unexpectedly fall within the reporting obligation.

When Attorneys May Be Required to Report

A common question among real estate and business attorneys is whether lawyers are exempt from reporting obligations. They are not.

FinCEN provides no carve-out for attorneys. If an attorney’s role places them within the reporting cascade—such as by preparing closing documents, handling settlement responsibilities, or being designated in writing—they may be required to file the Real Estate Report.

This is especially relevant in transactions where:

• An attorney coordinates the closing outside of a traditional escrow structure
• The attorney prepares or controls key transfer documents
• The transaction involves layered entities or trusts requiring careful ownership analysis

Early legal review can help identify whether the rule applies at all—and, if so, who should bear responsibility.

Designation Agreements: A Critical Risk-Management Tool

Many transactions involve multiple professionals, each of whom could potentially be a reporting person. FinCEN expressly allows parties to resolve this through a written designation agreement, which can be an invaluable tool in complex or high-value deals.

Benefits of a Designation Agreement

• Clarifies responsibility before closing
• Prevents confusion or duplicate reporting
• Assigns reporting to the party with the best access to ownership information
• Reduces compliance exposure for other participants

To be valid, a designation agreement must be in writing and include:

• Names and addresses of the parties
• Property information
• Identification of the designated reporting person

Legal counsel is often best positioned to draft or review these agreements to ensure enforceability and compliance.

Best Practices for Legal and Business Professionals

Although the rule is not effective until 2026, prudent practitioners should begin planning now.

Key best practices include:

• Determine reporting responsibility early
• Do not wait until closing to identify the reporting person—particularly in entity or trust transactions.
• Use written designation agreements when appropriate
• Where another party is better suited to report, formalize that decision in writing.
• Collect beneficial ownership information proactively
• Reporting requires disclosure of transferee entity or trust ownership, including names, addresses, and taxpayer identification numbers.

Maintain records

FinCEN requires retention of designation agreements and ownership certifications for at least five years.

Coordinate with title and escrow professionals

Clear communication among all closing participants is essential to ensure accurate and timely compliance.

Final Thoughts

FinCEN’s Residential Real Estate Rule represents a significant shift in how certain residential transactions are regulated, placing new responsibilities on the professionals at the center of the closing process. While title and escrow companies will often serve as reporting persons, attorneys may also assume that role depending on transaction structure and documentation.

Early legal involvement can help clients:

• Determine whether the rule applies
• Allocate reporting responsibility strategically
• Avoid last-minute compliance surprises
• Reduce regulatory and transactional risk

At Strategy Law, we advise clients to address these issues well before closing through clear communication, careful documentation, and informed legal guidance. Proactive planning is the most effective way to remain compliant while keeping transactions moving efficiently.

Common Questions:

1. What is the FinCEN Residential Real Estate Reporting Rule?

It is a new federal regulation requiring certain real estate professionals to file a “Real Estate Report” for non-financed (all-cash) transfers of residential property to entities or trusts. The goal is to prevent money laundering by identifying the “beneficial owners” behind these transactions.

2. When does this rule go into effect?

The rule becomes effective nationwide on March 1, 2026. Any reportable transaction closing on or after this date must comply with the new reporting requirements.

3. What types of properties are covered?

The rule applies to “residential real property,” which includes:

• Single-family homes, townhouses, condominiums, and cooperatives.

• Buildings designed for occupancy by one to four families.

• Vacant or unimproved land where the buyer intends to build a one-to-four family structure.

4. Who is responsible for filing the report?

The “reporting person” is the individual or entity responsible for the filing. This is determined by a Reporting Cascade—a hierarchy of professionals involved in the deal. The person at the top of the list has the primary duty. If they aren’t involved, it moves to the next person:

1. The closing or settlement agent listed on the statement.

2. The person who prepares the closing/settlement statement.

3. The person who records the deed.

4. The title insurance underwriter.

5. The person disbursing the greatest amount of funds.

6. The title evaluator.

7. The person who prepares the deed or transfer instrument.

5. Can we choose who handles the reporting?

Yes. Through a Written Designation Agreement, professionals in the cascade can agree to assign the reporting responsibility to one specific party (e.g., the title company or the attorney). This helps avoid double-reporting and ensures a clear chain of responsibility.

6. Do attorneys have to report?

Yes. There is no “attorney-client privilege” exemption for this reporting. If a lawyer performs a role in the cascade—such as preparing the deed or acting as the settlement agent in a private deal—they may be legally obligated to file the report unless another party is designated.

This blog is written as of January 2026.  Recommendations and legal requirements are changing rapidly, so please continue to review our legal updates or review postings on relevant government websites.

All blogs on this site are for educational purposes only, do not constitute legal advice or opinion, and should not be applied to your situation, or any specific situation, without consultation with counsel. Strategy Law, LLP does not provide any legal advice concerning any matter discussed in a blog except upon formal engagement including, without limitation, execution of Strategy Law, LLP’s formal legal services agreement, and with respect to specific factual situations.  No blog constitutes a guaranty, warranty, or prediction regarding the result of any legal matter discussed in the blog or any representation